Unlawful bank charges
Keith Parkins | 26.02.2007 17:13 | Analysis | Repression | Social Struggles
For years, High Street banks have been ripping off their customers with illegal charges. Customers are now demanding payment in full of all the monies taken out of their accounts illegally. Customers could be owed billions of pounds.
"For years, all the high street banks have routinely ripped off millions of customers and now they are going to pay the penalty." -- Martin Lewis, founder of Moneysavingexpert.com
"We believe bank customers paid £4.7bn in unauthorised overdraft charges last year alone - many have already claimed back some or all of this money, with awards ranging from £70 to thousands of pounds." -- Helen Ainsworth, consumer group Which?
"At first, a trickle of brave people reported they had taken on their bank in court over borrowing charges - and won. Then the trickle became a stream - and now it's a flood." -- Martin Lewis, founder of Moneysavingexpert.com
"The banks always say these fees are set out clearly in their terms and conditions, but that argument is just nonsense. If I walked up to you in the street and told you I was going to punch you in the face, I'd still be breaking the law if that's what I did - it's exactly the same with these banks' charges." -- Martin Lewis, founder of Moneysavingexpert.com
"Banks used to be responsible, professional and customer-focused. Now they are irresponsible, profit-motivated and selfish organisations that think nothing of customers and think only of their own bottom line". -- Colin Breed MP
Go overdrawn with your bank by a few pence for as little as a day and you will be zapped with illegal penalty charges, usually of thirty pounds, though it varies from bank to bank. You are now overdrawn due to the penalty charge. Any further transactions and you are hit again and again. Before you know it, you are several hundred pounds in the red.
Then what happens is you get threatening letters from your bank, maybe from their lawyers, maybe even debt collectors will come calling. This for monies that the bank has stolen from your account.
The people who are being hardest hit are those on a very tight budget, those who have little money to spare, the poorest people in society. For example, as a single person on Job Seekers Allowance, get hit twice in a week and it will have more than wiped out your allowance for the week.
Martin Lewis, founder of Moneysavingexpert.com, details a case that indicated to him that something was very, very wrong:
"It was one of the first cases I worked on that made me passionate about this campaign. I met a woman who had always stayed on top of her finances, despite depending on benefits because she was a full-time carer. Then, two years ago, her benefits weren't paid for two weeks because of a clerical error. That triggered £250 in penalty charges from her bank, which she had no hope of absorbing, and the whole thing spiralled out of control. Within a year, she owed £3,000."
What we are seeing is naked corporate greed. Mafia thugs have nothing on this bunch of thugs.
There is plenty of legal opinion around, all of which is very clear on one simple point – these penalty charges are illegal, and you are entitled to a refund in full. The relevant legislation is the Unfair Terms in Consumers Contracts Regulations 1999, of which the banks are in breach.
The banks beg to differ. They claim that they are entitled to steal monies from our bank accounts, although they have yet to defend a single action in court. They will take customers to the brink, causing maximum hassle and distress, then settle at the last possible moment, before the judge makes a ruling.
The view of the banks, expressed on Money Box (BBC Radio 4, Saturday 24 February 2007, repeated Sunday 25 February 2007) is that they do not defend these actions in court as they do not wish to upset their customers and have a bad relationship with their customers.
What a load of bollocks!
Oh, so it is ok to steal billions of pounds from customers' accounts, but we do not wish to upset our customers by having a judgment in court. It is estimated that the big banks stole £4.7 billion from customers' accounts last year. The FT puts the figure at £10 billion!
That this view is a load of bollocks, is seen by the fact that the banks are only too keen to see you in court and have a judgment against you, should you owe them money.
The hypocrisy of the banks is seen when they close accounts of customers who have demanded and successfully received the monies that have been stolen. The banks obviously only want mugs as customers, mugs who are happy to have money stolen from their accounts.
Banks known to be intimidating their customers with threats to close accounts are HSBC, Alliance and Leicester, The Abbey, and Nationwide.
If you are threatened or intimidated by your bank, complain to the Financial Ombudsman Service as you may well be entitled to compensation. An Alliance and Leicester customer who lodged a complaint after their account was closed was awarded £125 compensation.
The Financial Ombudsman Service has said: 'Consumers should not be penalised for exercising their right to complain.'
As Doug Taylor, personal finance campaigner at Which?, has said:
"We cannot think of another industry which would penalise its customers in such a manner for making a complaint. Don't play into the bank's hands and be put off from reclaiming these charges."
The judges who are are having to deal with these cases are getting pretty pissed off. The cases are clogging up the courts to no avail, as no judgment is ever reached. The banks do not wish to see a ruling as they know it will set a precedent and open the floodgates to further claims against them.
In Lincoln, District Judge Richard Toombs who sits in the Lincoln County Court, has well and truly put the cat amongst the pigeons. He is of the opinion that the banks are abusing the legal system. Even though many banks have begun legal proceedings against customers refusing to pay charges, no case has yet to reach court. He has asked banks to prove that they are serious and the case will go to court, otherwise he will ignore their defence. He gave Lloyds TSB 14 days to list details of every claim pursued and whether each was settled. Courts across the country are watching with great interest.
Judge Paul Collins, a senior civil judge, has called on financial regulatory authorities to investigate the legality of bank charges in the absence of any court ruling. He has said his fellow judges are 'frustrated' by the number of legal disputes between banks and their customers.
There are four easy steps to take to recover your money:
- write to your bank demanding details of all unlawful deductions and interest charges going back 6 years
- write to your bank demanding repayment of all monies owed
- threaten to sue if the money is not forthcoming
- file a claim in the Small Claims Court
How far you have to go depends upon whether or not the bank plays ball. Once you have got details and demanded that the bank pays up, they may, after a little stalling, pay up. If not, then you have to proceed to the following steps.
It would be wise to open a second account if your account is with one of the banks known to intimidate customers who complain.
An alternative route to the Small Claims Court to recover your money is through the Financial Ombudsman Service, and it is free. Each claim in the Small Claims Court costs about £80, a fee that is refundable if you win your case.
Remember, every single claim filed against the banks has been settled in favour of the customer.
In one case, the bank failed to contest the claim, the customer was awarded against the bank and sent bailiffs into the bank to seize computer equipment to the value of the debt.
Remember, the law and the courts are on your side.
There are plenty of websites that list the case law, a few test cases, and pro forma letters that you can download and adapt to your own needs.
Just go for it.
You should also file a complaint with the OFT, FSA and Financial Services Ombudsman. Contact details from your bank.
It beggars belief that even whilst the banks are in the middle of an OFT investigation into unlawful charges, they still continue to rip off their customers. OFT found against the banks for ripping off credit card customers with unlawful charges, and the banks fear the OFT will reach the same findings on current accounts. It is a case of make hay while the sun shines or rip off your customers whilst you can.
OFT is expected to report some time in March.
Barclays has recorded seven billion pounds profit, up by over 30% on last year. The major banks over the next few weeks are expected to report profits of around 40 billion pounds.
Banks are making almost twice as much profit from customers today as they did only 10 years ago. Each personal account now brings in around £232 a year, compared with £127 in 1997. Bank charges have increased steeply over this period. Many banks charge £30 a day for going overdrawn without permission. Such fees are manifestly disproportionate, and thus illegal.
Historically banks have held a dominant position over their customers. And many bank managers have exploited the instinctive deference of many borrowers. But this is changing. People are utilising their power as consumers. They are beginning to realise that banks are just another high-street service, a poor service at that.
Websites
http://news.bbc.co.uk/1/hi/programmes/moneybox/default.stm
http://www.moneysavingexpert.com/bankcharges
http://www.penaltycharges.co.uk/
http://www.thisismoney.co.uk/bankcharges
http://www.which.net/campaigns/personalfinance/bankingcharges/whatyoucando.html
http://www.which.net/campaigns/personalfinance/bankingcharges/index.html
http://www.bankcharges.info/
http://bankchargeshell.co.uk/
http://www.consumeractiongroup.co.uk/
http://www.moneyclaim.gov.uk/
http://www.hmcourts-service.gov.uk/
http://www.financial-ombudsman.org.uk/consumer/complaints.htm
http://www.fsa.gov.uk/
http://www.oft.gov.uk/
http://www.bankingcode.org.uk/
http://www.debt-on-our-doorstep.com/
References
Suzy Austin, Complaints soar over 'unfair' bank charges, Metro, 23 February 2007
Bank bars overdraft charge rebels, BBC News on-line, 10 June 2006
http://news.bbc.co.uk/1/hi/business/5056882.stm
Bank Charges, BBC News on-line, 15 July 2006
http://news.bbc.co.uk/1/hi/programmes/moneybox/5176592.stm
Bank customer gets £2,000 refund, BBC News on-line, 3 June 2006
http://news.bbc.co.uk/1/hi/northern_ireland/5043154.stm
Banks warned over charges, Lincolnshire Echo, date unknown
Claims firms challenge bank charges, BBC News on-line, 6 October 2006
http://news.bbc.co.uk/1/hi/programmes/moneybox/5409368.stm
Jane Croft and Sharlene Goff, Banks braced for backlash on charges, Financial Times, 24 February 2007
Jane Croft, Overdraft penalty fees probe threatens banking, Financial Times, 23 February 2007
Jane Croft, Judges want test ruling on overdraft charges, Financial Times, 23 February 2007
Sharlene Goff and Jane Croft, Banks braced for refund claim, Financial Times, 17 February 2007
Martin Hickman, The customers' revolt over high charges, The Independent, 26 February 2007
Bob Howard, Bank account closures criticised, BBC News on-line, 10 February 2007
http://news.bbc.co.uk/1/hi/programmes/moneybox/6349877.stm
Judge calls for probe, Metro, 23 February 2007
Martin Lewis, How to charge your bank, The Sun, 21 February 2007
Paul Lewis, Banks fight back on court action, BBC News on-line, 10 June 2006
http://news.bbc.co.uk/1/hi/programmes/moneybox/5067454.stm
James Moore, Barclays commits to 'free banking', The Independent, 21 February 2007
Overdraft fees under scrutiny, BBC News on-line, 8 September 2006
http://news.bbc.co.uk/1/hi/programmes/moneybox/5328136.stm
David Prosser, Customers see red over the scandal of illegal charges, The Independent, 20 February 2007
http://money.independent.co.uk/personal_finance/invest_save/article2287041.ece
David Prosser, The consumer champion behind growing rebellion, The Independent, 20 February 2007
http://money.independent.co.uk/personal_finance/invest_save/article2287042.ece
David Prosser, Bank charges: The rebellion gathers pace, The Independent, 21 February 2007
David Prosser, Do banks overcharge, and should we be upset by their huge profits, The Independent, 21 February 2007
Sean Poulter and James Coney, How the big banks get their revenge: Dare complain about illegal charges and your account could be closed, Daily mail, 22 February 2007
Saeed Shah, Revealed: total cost of the great bank robbery... £7.2 billion, The Independent, 26 February 2007
Jo Thornhill, Obsessed by profit: Your damning verdict on banks and their penalty charges, Financial Mail, The Mail on Sunday, 28 January 2007
"We believe bank customers paid £4.7bn in unauthorised overdraft charges last year alone - many have already claimed back some or all of this money, with awards ranging from £70 to thousands of pounds." -- Helen Ainsworth, consumer group Which?
"At first, a trickle of brave people reported they had taken on their bank in court over borrowing charges - and won. Then the trickle became a stream - and now it's a flood." -- Martin Lewis, founder of Moneysavingexpert.com
"The banks always say these fees are set out clearly in their terms and conditions, but that argument is just nonsense. If I walked up to you in the street and told you I was going to punch you in the face, I'd still be breaking the law if that's what I did - it's exactly the same with these banks' charges." -- Martin Lewis, founder of Moneysavingexpert.com
"Banks used to be responsible, professional and customer-focused. Now they are irresponsible, profit-motivated and selfish organisations that think nothing of customers and think only of their own bottom line". -- Colin Breed MP
Go overdrawn with your bank by a few pence for as little as a day and you will be zapped with illegal penalty charges, usually of thirty pounds, though it varies from bank to bank. You are now overdrawn due to the penalty charge. Any further transactions and you are hit again and again. Before you know it, you are several hundred pounds in the red.
Then what happens is you get threatening letters from your bank, maybe from their lawyers, maybe even debt collectors will come calling. This for monies that the bank has stolen from your account.
The people who are being hardest hit are those on a very tight budget, those who have little money to spare, the poorest people in society. For example, as a single person on Job Seekers Allowance, get hit twice in a week and it will have more than wiped out your allowance for the week.
Martin Lewis, founder of Moneysavingexpert.com, details a case that indicated to him that something was very, very wrong:
"It was one of the first cases I worked on that made me passionate about this campaign. I met a woman who had always stayed on top of her finances, despite depending on benefits because she was a full-time carer. Then, two years ago, her benefits weren't paid for two weeks because of a clerical error. That triggered £250 in penalty charges from her bank, which she had no hope of absorbing, and the whole thing spiralled out of control. Within a year, she owed £3,000."
What we are seeing is naked corporate greed. Mafia thugs have nothing on this bunch of thugs.
There is plenty of legal opinion around, all of which is very clear on one simple point – these penalty charges are illegal, and you are entitled to a refund in full. The relevant legislation is the Unfair Terms in Consumers Contracts Regulations 1999, of which the banks are in breach.
The banks beg to differ. They claim that they are entitled to steal monies from our bank accounts, although they have yet to defend a single action in court. They will take customers to the brink, causing maximum hassle and distress, then settle at the last possible moment, before the judge makes a ruling.
The view of the banks, expressed on Money Box (BBC Radio 4, Saturday 24 February 2007, repeated Sunday 25 February 2007) is that they do not defend these actions in court as they do not wish to upset their customers and have a bad relationship with their customers.
What a load of bollocks!
Oh, so it is ok to steal billions of pounds from customers' accounts, but we do not wish to upset our customers by having a judgment in court. It is estimated that the big banks stole £4.7 billion from customers' accounts last year. The FT puts the figure at £10 billion!
That this view is a load of bollocks, is seen by the fact that the banks are only too keen to see you in court and have a judgment against you, should you owe them money.
The hypocrisy of the banks is seen when they close accounts of customers who have demanded and successfully received the monies that have been stolen. The banks obviously only want mugs as customers, mugs who are happy to have money stolen from their accounts.
Banks known to be intimidating their customers with threats to close accounts are HSBC, Alliance and Leicester, The Abbey, and Nationwide.
If you are threatened or intimidated by your bank, complain to the Financial Ombudsman Service as you may well be entitled to compensation. An Alliance and Leicester customer who lodged a complaint after their account was closed was awarded £125 compensation.
The Financial Ombudsman Service has said: 'Consumers should not be penalised for exercising their right to complain.'
As Doug Taylor, personal finance campaigner at Which?, has said:
"We cannot think of another industry which would penalise its customers in such a manner for making a complaint. Don't play into the bank's hands and be put off from reclaiming these charges."
The judges who are are having to deal with these cases are getting pretty pissed off. The cases are clogging up the courts to no avail, as no judgment is ever reached. The banks do not wish to see a ruling as they know it will set a precedent and open the floodgates to further claims against them.
In Lincoln, District Judge Richard Toombs who sits in the Lincoln County Court, has well and truly put the cat amongst the pigeons. He is of the opinion that the banks are abusing the legal system. Even though many banks have begun legal proceedings against customers refusing to pay charges, no case has yet to reach court. He has asked banks to prove that they are serious and the case will go to court, otherwise he will ignore their defence. He gave Lloyds TSB 14 days to list details of every claim pursued and whether each was settled. Courts across the country are watching with great interest.
Judge Paul Collins, a senior civil judge, has called on financial regulatory authorities to investigate the legality of bank charges in the absence of any court ruling. He has said his fellow judges are 'frustrated' by the number of legal disputes between banks and their customers.
There are four easy steps to take to recover your money:
- write to your bank demanding details of all unlawful deductions and interest charges going back 6 years
- write to your bank demanding repayment of all monies owed
- threaten to sue if the money is not forthcoming
- file a claim in the Small Claims Court
How far you have to go depends upon whether or not the bank plays ball. Once you have got details and demanded that the bank pays up, they may, after a little stalling, pay up. If not, then you have to proceed to the following steps.
It would be wise to open a second account if your account is with one of the banks known to intimidate customers who complain.
An alternative route to the Small Claims Court to recover your money is through the Financial Ombudsman Service, and it is free. Each claim in the Small Claims Court costs about £80, a fee that is refundable if you win your case.
Remember, every single claim filed against the banks has been settled in favour of the customer.
In one case, the bank failed to contest the claim, the customer was awarded against the bank and sent bailiffs into the bank to seize computer equipment to the value of the debt.
Remember, the law and the courts are on your side.
There are plenty of websites that list the case law, a few test cases, and pro forma letters that you can download and adapt to your own needs.
Just go for it.
You should also file a complaint with the OFT, FSA and Financial Services Ombudsman. Contact details from your bank.
It beggars belief that even whilst the banks are in the middle of an OFT investigation into unlawful charges, they still continue to rip off their customers. OFT found against the banks for ripping off credit card customers with unlawful charges, and the banks fear the OFT will reach the same findings on current accounts. It is a case of make hay while the sun shines or rip off your customers whilst you can.
OFT is expected to report some time in March.
Barclays has recorded seven billion pounds profit, up by over 30% on last year. The major banks over the next few weeks are expected to report profits of around 40 billion pounds.
Banks are making almost twice as much profit from customers today as they did only 10 years ago. Each personal account now brings in around £232 a year, compared with £127 in 1997. Bank charges have increased steeply over this period. Many banks charge £30 a day for going overdrawn without permission. Such fees are manifestly disproportionate, and thus illegal.
Historically banks have held a dominant position over their customers. And many bank managers have exploited the instinctive deference of many borrowers. But this is changing. People are utilising their power as consumers. They are beginning to realise that banks are just another high-street service, a poor service at that.
Websites
http://news.bbc.co.uk/1/hi/programmes/moneybox/default.stm http://www.moneysavingexpert.com/bankcharges http://www.penaltycharges.co.uk/ http://www.thisismoney.co.uk/bankcharges http://www.which.net/campaigns/personalfinance/bankingcharges/whatyoucando.html http://www.which.net/campaigns/personalfinance/bankingcharges/index.html http://www.bankcharges.info/ http://bankchargeshell.co.uk/ http://www.consumeractiongroup.co.uk/ http://www.moneyclaim.gov.uk/ http://www.hmcourts-service.gov.uk/ http://www.financial-ombudsman.org.uk/consumer/complaints.htm http://www.fsa.gov.uk/ http://www.oft.gov.uk/ http://www.bankingcode.org.uk/ http://www.debt-on-our-doorstep.com/ References
Suzy Austin, Complaints soar over 'unfair' bank charges, Metro, 23 February 2007
Bank bars overdraft charge rebels, BBC News on-line, 10 June 2006
http://news.bbc.co.uk/1/hi/business/5056882.stm Bank Charges, BBC News on-line, 15 July 2006
http://news.bbc.co.uk/1/hi/programmes/moneybox/5176592.stm Bank customer gets £2,000 refund, BBC News on-line, 3 June 2006
http://news.bbc.co.uk/1/hi/northern_ireland/5043154.stm Banks warned over charges, Lincolnshire Echo, date unknown
Claims firms challenge bank charges, BBC News on-line, 6 October 2006
http://news.bbc.co.uk/1/hi/programmes/moneybox/5409368.stm Jane Croft and Sharlene Goff, Banks braced for backlash on charges, Financial Times, 24 February 2007
Jane Croft, Overdraft penalty fees probe threatens banking, Financial Times, 23 February 2007
Jane Croft, Judges want test ruling on overdraft charges, Financial Times, 23 February 2007
Sharlene Goff and Jane Croft, Banks braced for refund claim, Financial Times, 17 February 2007
Martin Hickman, The customers' revolt over high charges, The Independent, 26 February 2007
Bob Howard, Bank account closures criticised, BBC News on-line, 10 February 2007
http://news.bbc.co.uk/1/hi/programmes/moneybox/6349877.stm Judge calls for probe, Metro, 23 February 2007
Martin Lewis, How to charge your bank, The Sun, 21 February 2007
Paul Lewis, Banks fight back on court action, BBC News on-line, 10 June 2006
http://news.bbc.co.uk/1/hi/programmes/moneybox/5067454.stm James Moore, Barclays commits to 'free banking', The Independent, 21 February 2007
Overdraft fees under scrutiny, BBC News on-line, 8 September 2006
http://news.bbc.co.uk/1/hi/programmes/moneybox/5328136.stm David Prosser, Customers see red over the scandal of illegal charges, The Independent, 20 February 2007
http://money.independent.co.uk/personal_finance/invest_save/article2287041.ece David Prosser, The consumer champion behind growing rebellion, The Independent, 20 February 2007
http://money.independent.co.uk/personal_finance/invest_save/article2287042.ece David Prosser, Bank charges: The rebellion gathers pace, The Independent, 21 February 2007
David Prosser, Do banks overcharge, and should we be upset by their huge profits, The Independent, 21 February 2007
Sean Poulter and James Coney, How the big banks get their revenge: Dare complain about illegal charges and your account could be closed, Daily mail, 22 February 2007
Saeed Shah, Revealed: total cost of the great bank robbery... £7.2 billion, The Independent, 26 February 2007
Jo Thornhill, Obsessed by profit: Your damning verdict on banks and their penalty charges, Financial Mail, The Mail on Sunday, 28 January 2007
Keith Parkins
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